What higher real yields mean for your money
- Brendan Moody
- Jul 27
- 4 min read
Updated: Aug 17
Treasury yields have climbed to some of their highest levels in recent years. The 10-year Treasury yield is above 4.6%, and the 30-year has stayed above 5% for its longest stretch since 2007. This is generally good news for long-term investors, since higher yields can help portfolios generate income and stability.
Understanding the difference between nominal and real yields is key. A nominal yield is simply the stated interest rate on a bond. A real yield goes one step further: it shows what an investor actually earns after accounting for inflation. They show what you actually earn and serve as a measuring stick for everything else. So what should investors keep in mind as real yields rise?
Long-term real yields are near their highest point in many years
The chart above shows how real yields have changed over the past 15 years. Back in 2020, real yields on government bonds actually turned negative. That meant investors were accepting a guaranteed loss of purchasing power just to hold the safety of U.S. Treasury bonds. The Federal Reserve (the Fed, which is the central bank of the U.S.) had cut interest rates to support the economy and encourage investors to move into stocks and real estate.
Things shifted in 2022 when inflation spiked and the Fed began raising rates quickly. Today, the 10-year nominal Treasury yield is around 4.7%, while the real yield is 2.4%, which is well above levels seen since the 2008 financial crisis. A few forces are keeping yields elevated: oil prices have climbed above $90 per barrel, gasoline is back above $4 per gallon nationally,² and the growing national debt (now above $39 trillion) is pushing up borrowing costs for the government.³
Higher yields affect the attractiveness of stocks versus bonds
The chart above shows the S&P 500 earnings yield, which measures how much a company earns relative to its stock price. When you compare it to bond yields, you get a sense of which investment looks more attractive. This comparison is sometimes called the "equity risk premium."⁴
When real yields were near zero, as they were for much of the period after 2008, bonds offered little competition to stocks. That era was often described as TINA, or "there is no alternative." Now, with real yields at 2.4% on government bonds and the S&P 500 earnings yield at roughly 4.9%, the balance between stocks and bonds in your portfolio demands more careful attention than before.
Fed policy adds another layer of uncertainty for bond yields
Another factor pushing yields higher is uncertainty around Fed policy under its new leader, Kevin Warsh. One key initiative involves examining the Fed's $6.7 trillion balance sheet, which is the collection of assets the Fed holds. As the chart shows, this balance sheet swelled with each economic crisis and remains far larger than it was before 2008. Warsh supports shrinking it when the economy is healthy, which would involve selling bonds and could push yields even higher.
For long-term investors, here's the bottom line: you still need a thoughtful mix of stocks, bonds, and other assets built for your goals. Higher yields don't change that.
The bottom line? Real yields are at their highest levels in years, driven by inflation concerns, fiscal uncertainty, and a shrinking Fed balance sheet. That's the environment we're in. The investment lesson hasn't changed: a portfolio built for your specific goals and properly balanced across stocks, bonds, and other assets matters more now than it did when bonds were yielding nothing.
References
4. Clearnomics research and LSEG data as of July 27, 2026
Index Descriptions
S&P 500
The Standard & Poor's 500 Index is a capitalization-weighted index of 500 stocks designed to measure performance of the broad domestic economy through changes in the aggregate market value of 500 stocks representing all major industries.
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